NEW DELHI: Wholesale price inflation soared to an 11-year high of 10.5% in April, compared to 7.4% in March, on the back of hardening prices of fuel, manufactured products, minerals, some food items and a low base, further straining an economy already struggling with the pandemic.
According to the Department for Promotion of Industry and Internal Trade data released on Monday, the 10.5% rate is the highest in the current series unveiled in April 2013. According to the methodology for comparison with various other series, it is the highest since 10.9% recorded in April 2010. Wholesale price index-based inflation had declined 1.6% in April 2020.
The surge in WPI comes against the backdrop of a cooling in retail inflation, which slowed to a three-month low of 4.3% in April. The Reserve Bank of India relies on the retail inflation data for its decisions on interest rates.
Inflation for primary food articles shot up to a six-month high of 4.9% in April compared to 3.2% in the previous month. Fruits, eggs, meat and fish prices rose in double digits while vegetable and price of pulses softened. Inflation in non-food articles soared to 15.6% in April while the fuel and power group rose an annual 21% during the month due to the hardening of global prices. Manufactured product prices rose 9% during April, higher than previous month’s 7.3%, which economists said was the result of the return of pricing power and the impact of rising global commodity prices.
Economists said the RBI is likely to continue with its pause on interest rates for now despite slowing growth.
“We expect the headline WPI inflation to rise further to 13-13.5% in the current month before commencing a downtrend, whereas the core-WPI inflation may continue to rise over the next three prints to a peak of around 10.5%,” said Aditi Nayar, principal economist at ratings agency ICRA. Core inflation is excluding food and fuel, which shot up to a series high of 8.4% in April.
“The likely trajectory of the WPI inflation supports our view that there is no space for rate cuts to support the faltering growth momentum, even as we expect the monetary stance to remain accommodative. There is a growing divergence in terms of the global optimism related to the vaccine rollout, which is pushing up commodity prices, vs. the weaker domestic sentiment hit by the continuing impact of the second wave of covid-19 infections in India,” said Nayar.
FacebookTwitterLinkedinEMail
